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| Marks & Spencer profits jump for first time in four years | Marks & Spencer profits jump for first time in four years |
| (about 5 hours later) | |
| Marks & Spencer has delivered its first increase in profits since 2011, thanks to a tight rein on capital spending, less discounting and better deals with suppliers. | Marks & Spencer has delivered its first increase in profits since 2011, thanks to a tight rein on capital spending, less discounting and better deals with suppliers. |
| The high street retailer said it would return £150m to shareholders via a share buyback and increase its final dividend by 7.4%, after underlying profit before tax rose 6.1% to £661.2m in the year to 28 March. | |
| Sales rose just 0.4% to £10.3bn after another difficult year for M&S clothing, when sales fell 2.5% offset by a 3.4% rise in food sales. Underlying clothing sales only began to rise in the final quarter of the financial year after four years without growth. | |
| Mark Bolland, the chief executive, said the company’s food business had enjoyed an “outstanding year in a difficult market” and that its clothing and homewares division had been able to significantly increase its profit margins despite a sales performance “below our expectations.” | Mark Bolland, the chief executive, said the company’s food business had enjoyed an “outstanding year in a difficult market” and that its clothing and homewares division had been able to significantly increase its profit margins despite a sales performance “below our expectations.” |
| “We are transforming M&S into a stronger, more agile business – putting the right infrastructure, capabilities and talent in place to drive our strategic priorities,” he said. | “We are transforming M&S into a stronger, more agile business – putting the right infrastructure, capabilities and talent in place to drive our strategic priorities,” he said. |
| Related: Marks & Spencer: what the analysts say | |
| The Dutchman, refused to declare a definitive turn in M&S’s fortunes but said the retailer had now completed the “heavy lifting” of investment and was now ready to deliver improving profits and on-going cash pay-outs for shareholders. | |
| Asked if he would still be around in a year’s time to deliver that next phase, Bolland, who has previously faced pressure from shareholders over the slow pace of reform at M&S said: “Absolutely - is that clear enough?” | |
| He said M&S could have delivered a rise in profits earlier if had not invested in new IT and distribution systems or in improving the lay-out of stores “as had been done in the past.” | |
| “We have chosen to do this the hard way,” he said. | |
| The upbeat announcement provides some relief for Bolland, who joined M&S five years ago. The company was able to signal a payout after increasing profit margins on clothing and homewares by 1.9 percentage points, thanks to better deals with suppliers and less discounting. Profit margins also rose at the food business, which opened 62 new Simply Food outlets. | The upbeat announcement provides some relief for Bolland, who joined M&S five years ago. The company was able to signal a payout after increasing profit margins on clothing and homewares by 1.9 percentage points, thanks to better deals with suppliers and less discounting. Profit margins also rose at the food business, which opened 62 new Simply Food outlets. |
| Performance at M&S’s overseas business, a key plank of Bolland’s strategy, was disappointing. Operating profits dived nearly 25% to £92m and sales slid 2% on a constant currency basis, amid political and economic difficulties in Russia, the Ukraine and Turkey. Sales also went into reverse at M&S.com, falling by 2% after problems at the group’s hi-tech distribution centre in Castle Donington. | |
| Bolland said he expected the clothing and homeware markets to remain “highly competitive.” But he said M&S would increase gross margins on its clothing and homeware ranges by between 1.5% and 2% as it improved its logistics network and IT systems. The company is also confident it will improve clothing profitability by getting better deals with suppliers as it cuts out middlemen with the help of veteran sourcing experts, brothers Mark and Neal Lindsey, hired by Bolland last year. | |
| M&S is also trying to lift sales by bringing more new ideas, better quality and more stylish design to shoppers as well as better availability of product. | |
| Related: Truth of Bolland's reign at M&S lies between extreme caricatures | |
| On the food side, M&S is stepping up expansion of its Simply Food chain. The company now plans to open 250 more of the small local stores in teh three years to March 2017 compared to 200 it had promised previously. | |
| Analysts said M&S’ performance was in line with expectations but agreed with Bolland that it was too early to be certain that M&S had turned a corner. | |
| “We feel that current UK clothing sales remain unexciting to judge by the amount of in-store and online promotion. So it would be wrong in our view to “over” interpret these results as being ‘all the problems are sorted’,” said Tony Shiret an analyst at BESI. |